On April 17, the Supreme Court heard oral arguments in South Dakota v. Wayfair, Inc., a case dealing with whether states should have the power to levy taxes on companies in other states.

Most observers see this issue as a fight over taxing the Internet, taxing online sales, or a battle between Main Street merchants and Silicon Valley tech firms. Those are all parts of the story, but I’ve explained that this also is a contest between two competing approaches to taxation.

On one side are pro-market people who favor origin-based taxation, which is based on the notion that sales should be taxed where the merchant is based.

On the other side are pro-government people who want destination-based taxation, which is based on the notion that sales should be taxed where the consumer lives.

Needless to say, I’m not on the pro-government side of the battle. Here’s some of what I wrote when I was at the Heritage Foundation way back in 2001.

Requests to establish this destination-based tax authority should be denied. Such a regime would create an anti-consumer sales tax cartel for the benefit of profligate governments. It also would undermine privacy by requiring the collection of data on individual purchases. And it would violate important constitutional principles by giving state and local governments the power to impose their own taxes on businesses in other states.

All of that is still true today, but let’s look at some more recent analysis of the issue, all of which is tied to last week’s hearing at the Supreme Court.

George Will opines on South Dakota’s revenue grab for the Washington Post.

South Dakota has enacted a law contradicting a 26-year-old court decision concerning interstate commerce, and a law Congress passed and extended 10 times. It wants to tax purchases that are made online from vendors that have no physical presence in the state. South Dakota wants to increase its revenue and mollify its Main Street merchants. …In 1992, in the Internet’s infancy, the court held that retailers are required to collect a state’s sales taxes only when the retailers have a “substantial nexus” — basically, a physical, brick-and-mortar presence — in the state where the item sold is purchased. Such a nexus would mean that the retailer benefits from, and should pay for, local government services. Absent such a nexus, however, states’ taxation of sales would violate the Constitution, which vests in Congress alone the power to impose such burdens on interstate commerce. …Internet commerce…could not have flourished if vendors bore the burden of deciphering and complying with the tax policies of 12,000 state and local taxing jurisdictions, with different goods exempted from taxation. …the Internet Tax Freedom Act…is intended to shield small Internet sellers from discriminatory taxes and compliance burdens. …South Dakota is seeking the court’s permission for its extraterritorial grasping. …Governments often are reflexively reactionary when new technologies discomfort established interests with which the political class has comfortable relations of mutual support. The state’s sales-tax revenue has grown faster than the state’s economy even as Internet retailing has grown. …Traditional retailing will…prosper or not depending on market forces, meaning Americans’ preferences. State governments should not try to prevent this wholesome churning from going where it will.

The Wall Street Journal also has opined in favor of limits on the ability of states to impose their laws outside their borders.

The Supreme Court’s landmark 1992 Quill decision protects small businesses across the country from tax-grubbing politicians across the country. …At issue in South Dakota v. Wayfair is whether governments can tax and regulate remote retailers that don’t enjoy the state’s representation or benefit from its public services. …Fast forward 25 years. States complain that online commerce is eroding their tax base. Brick-and-mortar stores grouse that remote retailers are dodging taxes, putting them at a competitive disadvantage. …Politicians would prefer to soak out-of-state retailers rather than their own taxpayers. But America’s founders devised the Commerce Clause to prevent states from burdening interstate commerce and making long-arm tax grabs.

Here’s a troubling tidbit from the WSJ editorial. The Trump Administration is siding with South Dakota politicians, using the same statist rationale as the European politicians who are trying to grab more money from high-tech American companies.

The Justice Department has filed a brief supporting South Dakota… Seriously? According to Justice, businesses that operate a website have a “virtual” presence everywhere. The European Commission has invoked the same argument to impose a digital tax on Silicon Valley tech giants, which the Trump Administration has denounced as an extraterritorial tax grab.

Veronique de Rugy explains in her Reason column that state governments want to overturn Quill because they don’t want tax competition.

If you think internet companies aren’t paying any taxes for online sales and that’s killing bricks-and-mortar retailers and states’ budgets, you, my friend, have been duped. Nothing could be further from the truth. …Most state lawmakers want to see Quill overturned, allowing them to force out-of-state companies to collect sales taxes on their behalf. This argument was just heard by the Supreme Court… If the states were to win, they would be able to reach into the pockets of that mom selling her paintings on Etsy, even though she may live on the other side of the country, didn’t elect other states’ officials, and never agreed to those states’ tax laws. …tax competition among states would also be lost if Quill were overturned. Under the new regime, online consumers—no matter where they shop or what they buy—would lose the ability to shop around for a better tax system. Without the competitive pressure and the fear of losing consumers to lower-tax states, lawmakers would not feel the need to try to rein in their sales tax burden. It’s that pressure, which limits their tax grabbing abilities, that these lawmakers resent and want the Supreme Court to put an end to. …There is a lot to be lost in the Wayfair case. If Quill were to be overturned, compliance costs could skyrocket for many retailers, and good principles of taxation would be thrown out the window. Healthy tax competition is at stake. Let’s hope the highest court in the land makes the right decision.

In a column for the Wall Street Journal, Chris Cox, former Congressman and former Chairman of the Securities and Exchange Commission, debunks the notion that states are suffering for a loss of tax revenue.

‘Our states are losing massive sales-tax revenues that we need for education, health care, and infrastructure,” South Dakota’s Attorney General Marty Jackley told the U.S. Supreme Court… His state’s Supreme Court opined that sales tax revenues have “declined.” The state Legislature, citing its own “finding” to this effect, enacted a law requiring out-of-state retailers to collect sales tax on purchases shipped to South Dakota.

…the law is based on a false premise. The state’s own data show that sales and use tax revenue grew from $787.7 million in 2013 to $974.7 in 2017—considerably faster than the state’s rate of economic growth. The governor’s budget for 2018 projects the state’s sales and use tax revenue will be more than $1 billion, 4% higher than last year, with no change in rate. That’s 29% higher than five years earlier. Sales-tax revenues have been booming in other states, too.

In other words, politicians are greedy and they’re willing to prevaricate. They want more and more revenue and they don’t want to face competitive pressure that might limit their ability to extract more money that can be used to buy votes.

Is anyone shocked?

P.S. The fight between “origin-based” and “destination-based” approaches to consumption taxation is very analogous to the fight between “territorial” and “worldwide” approaches to income taxation.

Here’s an easy-to-understand example. Gambling is basically illegal (other than government-run lottery scams, of course) in my home state of Virginia. So they can arrest me (or maybe even shoot me) if I gamble in the Old Dominion.

I think that’s bad policy, but it would be far worse if Virginia politicians also asserted extraterritorial powers and said they could arrest me because I put a dollar in a slot machine during my last trip to Las Vegas.

And if Virginia politicians tried to impose such an absurd policy, I certainly would hope and expect that Nevada authorities wouldn’t provide any assistance.

This same principle applies (or should apply) to taxation policy, both globally and nationally.

On a global level, I’m a big supporter of so-called tax havens. I’m glad when places with pro-growth tax policy attract jobs and capital from high-tax nations. This process of tax competition rewards good policy and punishes bad policy. Moreover, I don’t think those low-tax jurisdictions should be under any obligation to enforce the bad tax laws of uncompetitive countries.

There’s a very similar debate inside America. Some states – particularly those with punitive sales taxes – want to force merchants in other states to be deputy tax enforcers.

I’ve written about this topic and I think even my writings from 2009 and 2010 are still completely relevant. But let’s check some other sources, starting with a column in the Wall Street Journal. It’s from 2016, but the issue hasn’t changed.

The state of Alabama is openly defying the U.S. Supreme Court in an effort to squeeze millions of dollars of tax revenue from businesses beyond its borders. …This unconstitutional tax grab cuts to the heart of the Commerce Clause, which gives Congress the power to regulate trade “among the several States.” Alabama’s regulation directly contravenes the Supreme Court’s 1992 ruling in Quill v. North Dakota. In that case, the court held that North Dakota could not require an out-of-state office-supply company to collect sales taxes because the firm had no offices or employees there. …Alabama’s revenue commissioner, Julie Magee, is putting forward an untested and suspect legal theory: The state claims that if its residents buy more than $250,000 a year from a remote business, then the seller has an “economic presence”… There are around 10,000 sales-tax jurisdictions in the U.S., with varying rates, rules and holidays, and different definitions of what is taxable. Keeping track of this ever-changing patchwork is a burden, and forcing retailers to scramble to comply would profoundly hinder interstate commerce in the Internet age.

And here are some excerpts from a column published that same year by Fortune.

When politicians call for “fairness,” it’s important to take a closer look at their definition of fair. See, for example, the nationwide push in state capitols to slap online sales taxes on out-of-state retailers—a simple tax grab… states are constitutionally prohibited from collecting sales taxes from retailers that have no presence within their borders…thanks to the U.S. Supreme Court’s 1992 ruling in Quill Corp. v. North Dakota… Any national online sales-tax system will burden online retailers to a degree never felt by brick-and-mortar businesses. Local businesses only have to deal with a limited number of sales taxes—usually only the state, county, and local levies that apply to specific stores. Online retailers, on the other hand, would have to calculate and apply sales taxes across the entire nation—and roughly 10,000 jurisdictions have such taxes. Complying with this convoluted system would necessarily raise costs for consumers and stifle competition.

And the debate continues this year. The Wall Street Journaleditorialized against extraterritorial state taxing last week.

A large faction of House Republicans are pressing GOP leaders to attach legislation to the omnibus spending bill that would let states collect sales tax from remote online retailers. South Dakota Rep. Kristi Noem’s legislation…would let some 12,000 jurisdictions conscript out-of-state retailers into collecting sales and use taxes from their customers. …Contrary to political lore, sales tax revenues have been increasing steadily in states with healthy economies. Over the past five years, Florida’s sales tax revenues have grown 27%. South Dakota’s are up by nearly 30% since 2013. …Twenty or so states have adopted “click-through” taxes to hit remote retailers that have contracts with local businesses. In 2016 South Dakota invited the High Court to revisit Quillby extending its sales tax to out-of-state sellers. …the Court could enable broader taxation and regulation of out-of-state businesses. This is what many states want to happen. …Raising taxes on small business and consumers won’t be a good look for Republicans in November, nor an inducement for investment and growth.

Jeff Jacoby also just wrote on this topic for his column in the Boston Globe.

First, the flow of interstate commerce must not be impeded by one state’s impositions. And second, there should be no taxation without representation; vendors should not be liable for taxes in states where they have no vote or political recourse. The Supreme Court upheld this “physical connection” standard in a 1992 case, Quill v. North Dakota. …the high court should reaffirm it. In the 26 years since the justices rebuffed North Dakota’s claim, the case against allowing states to exert their taxing power over remote sellers has grown even stronger. …there are now 12,000 taxing jurisdictions — not only states, counties, and cities, but also parishes, police districts, and Indian reservations. A lone online seller, unprotected by the Quill rule, could be obliged to remit taxes to any combination of them, with all their multitudinous rules and definitions, tax holidays and filing deadlines. …South Dakota can impose onerous burdens on companies operating within its borders, but not on vendors whose only connection to the state is that some of their customers happen to live there. The court got it right the first time. No merchant — whether selling online, via mail order, or in a traditional shop — is obliged to be a tax collector for states it doesn’t operate in.

And here are some passages from Jessica Melugin’s article for FEE. She makes the key point that extraterritorial tax powers would undermine – if not cripple – the liberalizing impact of tax competition.

…the Remote Transactions Parity Act (RTPA)…seeks to get rid of that physical presence limit on state taxing powers. It would let states reach outside their geographical borders and compel another state’s business to calculate, collect, and remit to that first state. …the long-term effect is that this arrangement will lessen the downward pressure on taxes between jurisdictions. Think of it like this: it’s the difference between driving your car across the D.C. border to Virginia to fill up with lower Virginia gas taxes—that’s how it works now and that’s what keeps at least some downward pressure on D.C. tax rates. If D.C. made the rate high enough, everyone would exit and fill up in Virginia. But if the approach in the RTPA is applied to this thought experiment, it would mean that when you pull into that Virginia gas station, they look at your D.C. plates and charge you the D.C. gas tax rate. …it’s a makeshift tax cartel among the states. …the RTPA is a small-business killer—which is why big box retailers support it. It crushes small competitors with compliance costs. State politicians are for it because they’d rather tax sellers in other states who can’t vote them out of office. Consumers will be left with less money in their pockets and fewer choices.

By the way, there are some pro-market people on the other side. Alex Brill of the American Enterprise Institute has written in favor of extraterritorial taxation.

…lawmakers have proposed legislation to allow (not require) states to collect sales tax on goods purchased from out-of-state sellers. …critics of this legislation…argue that “internet freedom is under attack by politicians willing to distort markets and tilt the playing field toward their favored businesses.” Internet freedom is certainly not being “attacked” by a policy to improve enforcement of existing tax liability. Second, these critics oppose the legislative reform based on the belief that just because the internet benefits people, online retail activities should be advantaged by public policy. If public finance were based on this type of specious logic, we would have a tax code far more unfair and distorted than it currently is.

I actually agree with both of his arguments. Giving states extraterritorial tax powers isn’t an attack on the Internet. And I also agree that tax policy shouldn’t provide special preferences.

But neither of his points address my concern that extraterritorial tax powers give too much power to governments and undermine tax competition.

For more information, here’s my speech to congressional staffers from 2012.

P.S. For folks who like technical details, this fight is not about Internet taxation. It’s a battle between “origin-based” taxation (basically territorial taxation) and “destination-based” taxation (basically worldwide or extraterritorial taxation). I favor the former and oppose the latter, which helps to explain my opposition to the border-adjustment tax and the value-added tax.

P.P.S. I was afraid that congressional leaders would attach a provision to the new spending bill that would allow extraterritorial taxation by states. Fortunately, that didn’t happen. So the “omnibus” plan is a pork-filled affront to fiscal sanity, but at least it’s not a state-goverment-empowering, pork-filled affront to fiscal sanity.

I don’t often use the literary tactic of referring to something as the “best-ever.” Indeed, the only time that phrase appeared in the title of a column was back in 2014 when I smugly wrote about the collapse of government-run single-payer healthcare in Vermont. Recalling what Justice Brandeis wrote about states being the “laboratories of democracy,” I asserted that the disaster in the Green Mountain State taught the entire nation a valuable lesson about the dangers of bad policy and that this was the “best-ever argument for federalism.”

Well, it’s time to once again use this superlative because consumers in California get the “best-ever receipt” when they make purchases at Firearms Unknown. Here’s the example that’s gone viral, and I’ve highlighted the relevant portion that gives an amusing description of California’s onerous sales tax.

By the way, not everything you see on the Internet is true (yes, shocking news). And since the folks at Independent Journal Review didn’t want to make the mistake of sharing without checking (like I did when trying to mock Justin Trudeau), they actually did some due diligence.

Many times, viral photos are too good to be true. So we contacted Firearms Unknown in National City, CA, to find out if this was one of those times. Sure enough, a representative with Firearms Unknown confirmed the receipt’s authenticity to Independent Journal Review. Then, he let out a chuckle. I guess if you’re going to operate a gun shop in a far-left state like California, you better have a good sense of humor. Bravo, Firearms Unknown.

Yes, kudos to the store, but I also want to take this opportunity to make a serious point about tax visibility.

One of the many reasons to oppose a value-added tax is that the tax almost always is hidden from consumers. When taxpayers make purchases in Europe, they don’t know that VATs are responsible, on average, for about 21 percent of the purchase price.

So it’s good that consumers in America know there’s a sales tax, both because it’s visible on their receipts and also because they can see the difference between the price on the shelf and the price at the cash register.

Though this system isn’t perfect. How many Americans, after all, know how much sales tax they paid last year?

The visibility issue also exists with the income tax. In theory, we all know what we paid the previous year based on our annual tax returns. But because of withholding, most Americans don’t really pay attention to that very important number and instead focus on whether they’re getting a refund. They actually think a big refund is a great outcome, even though it simply means that they gave the government an interest-free loan by over-paying their taxes during the year!

In the United States, the only levies that are visible (at least some of the time) are property taxes. Taxpayers usually have to make annual or semiannual payments on cars and houses (though property taxes on homes are sometimes built into mortgage payments).

And when you have to write a lump-sum check to the government, that’s a wonderful opportunity for people to ponder whether they’re actually getting good value for their money.

And since the answer almost always is no, it’s easy to understand why politicians are big fans of policies (such as VATs and withholding) that disguise the burden of taxation.

P.S. In the body of previous columns, I have used the “best-ever” superlative a handful of times.

To describe a cartoon on the link between the economic policies of Obama and Hollande.

A very high income tax burden is a major reason why New Jersey is so uncompetitive.

After thriving for centuries with no state income tax, it only took state politicians a few decades to create a very punitive system with the fifth-highest rate in the nation. Once again, the Tax Foundation has the data.

And this is exactly what’s been happening, with very negative effects on New Jersey’s economy. Here’s some of what I shared back in 2010.

More than $70 billion in wealth left New Jersey between 2004 and 2008 as affluent residents moved elsewhere, according to a report…Conducted by the Center on Wealth and Philanthropy at Boston College… The exodus of wealth, then, local experts and economists concluded, was a reaction to a series of changes in the state’s tax structure — including increases in the income, sales, property and “millionaire” taxes. “This study makes it crystal clear that New Jersey’s tax policies are resulting in a significant decline in the state’s wealth,” said Dennis Bone, chairman of the New Jersey Chamber of Commerce and president of Verizon New Jersey. …the report reinforces findings from a similar study he conducted in 2007 with fellow Rutgers professor Joseph Seneca, which found a sharp acceleration in residents leaving the state. That report, which focused on income rather than wealth, found the state lost nearly $8 billion in gross income in 2005.

By the way, politicians often impose taxes or increase tax rates using the excuse that they will lower other taxes.

And it hasn’t been uncommon for New Jersey politicians to tell voters that tax hikes will enable lower property taxes.

Yet if you look at this data from the Tax Foundation, the Garden State has the highest property tax burden in the nation.

The only “good news” is that New Jersey’s 6.97 percent state sales tax is only the 24th-highest in the United States.

Yet when you consider that there was no state sales tax until 1966, that’s hardly a sign of fiscal restraint.

Lesson Number 2: Get rid of taxes that are especially destructive.

New Jersey is one of only two states that impose both an inheritance tax and a death tax. The death tax is particularly pernicious since very successful taxpayers obviously have considerable ability to migrate to states with better policy.

A state Senate committee on Monday passed…bipartisan proposals to eliminate the estate tax… Proponents of the tax changes say people are leaving New Jersey to avoid its low thresholds on taxing inherited wealth and retirement income. More than 2 million people left New Jersey between 2005 and 2014, costing the state $18 billion in net adjusted income and $11.4 billion in economic activity, according to the New Jersey Business and Industry Association, which blames high taxes for the exodus. …State Sen. Steve Oroho (R-Sussex) said he expects the money New Jersey reaps from people who stay here will pay for the lost tax revenue. The bill (S1728) was approved 9-0 with four abstentions.

So it’s also important to look at what’s happening on the spending side of the budget. And it turns out that New Jersey wastes a lot of money.

I’ve already written about state bureaucrats being grossly overpaid (see here and here for some jaw-dropping examples).

But now let’s look at New Jersey’s “rate of return” or “efficiency” on transportation spending. This great video from Reason tells you everything you need to know.

And one of the reasons I shared this video is because New Jersey politicians want to boost the gas tax so they can spend even more money. Indeed, they may even hold the death tax hostage to get what they want.

Democrats have said they hope to leverage these tax cuts into a deal with Gov. Chris Christie to raise the gas tax.

I rhetorically asked back in 2010 whether Chris Christie could save New Jersey. We now know the answer is no, but maybe he can partially redeem himself by winning the death tax fight without surrendering on the gas tax.

I may decide to give up if something really horrible happens, such as adoption of a value-added tax.Giving politicians a big new source of revenue, after all, would cripple any incentive for fiscal restraint.

To be blunt, imposing a big national sales tax – in addition to the income tax – would be a horrible defeat for advocates of limited government. A VAT would lead to more spending and more debt.

Here’s a video I narrated on why the value-added tax is awful public policy.

Thankfully, I’m not the only one raising the alarm.

In a recent editorial, the Wall Street Journal wisely opined on the huge downside risk of a value-added tax.

It’s the hottest trend among tax collectors, raising a gusher of revenue for spendthrift governments worldwide. …a new report from accounting firm Ernst & Young says that VAT “systems are spreading” around the world and “rates are rising.”

By the way, the comment about “rates are rising” is an understatement, as illustrated by the table prepared by the Heritage Foundation.

Politicians love VATs both because they generate huge amounts of revenue and because the tax is hidden in the price of products and thus can be increased surreptitiously.

The WSJ explains.

The VAT is a sort of turbo-charged national sales tax on goods and services… Politicians love it because it is the most efficient revenue-raiser known to man, and its rates can be raised gradually to finance new entitlements or fill budget holes. The VAT is typically introduced with a low rate but then moves up over time until it swallows huge chunks of national economies. …Because VATs are embedded in the price of products, they can often rise unnoticed by the consumer, which is why liberals love them as a vehicle for periodic stealth tax hikes.

And in this case, “periodic” is just another way of saying “whenever politician want more money.”

And if recent history is any indication, “whenever” is “all the time.”

E&Y says standard VAT rates now average a knee-buckling 21.6% in the European Union, up from 19.4% in 2008. Average standard rates in the industrial countries of the Organization for Economic Cooperation and Development have climbed to 19.2% from 17.8% in 2009. Japan is another example of the VAT upward ratchet. The Liberal Democratic Party tried to introduce the tax for years and finally succeeded with a 3% rate in 1989. Eight years later the shoguns raised it to 5%. Last year it climbed to 8%, whacking consumption and sending the economy back to negative growth.

The Japanese experience is especially educational since the VAT is a relatively new tax in that nation.

By the way, you won’t be surprised to learn that politicians increased spending even more than they increased taxes.

So not only did VATs lead to more spending, they also led to more debt. I guess that’s a win-win from the perspective of statists.

Let’s now return to the WSJ editorial. Proponents sometimes claim that VATs are neutral and efficient. That may be somewhat true in theory (just as an income tax, in theory, might be clean and simple), but in the real world, VATs simply make it possible for politicians to auction off a new source of loopholes.

Americans, be warned. …don’t think it can’t happen here. Liberals campaign on soaking the rich, but they know there’s only so many rich to soak. To finance the growing entitlement state, they need a new broad-based tax that hits the middle class, where the big money is. That means either a VAT or a new energy tax, like the BTU tax Bill andHillary Clintonproposed in 1993 or the cap-and-tax scheme that PresidentObamawanted.

The WSJ is correct. We need to be vigilant in the fight against the VAT.

But what makes this battle difficult is that some putative allies are on the wrong side.

P.S. Some of you may be asking why leftists are so anxious for a VAT since they traditionally prefer class-warfare based tax hikes that extract revenue from the rich.

But here’s one of the dirty secrets of Washington. They may not admit it in public, but sensible leftists understand that there are Laffer-Curve constraints on extracting more revenue from upper-income taxpayers.

This doesn’t mean we can expect genuine tax reform tomorrow or the next day.

President Obama is viscerally committed to class-warfare tax policy, for instance, and special interest groups would vigorously resist if there was a real possibility (they would say threat) of scrapping the current tax code.

But it does suggest that tax reform – at least in the form of a flat tax – could happen if there was real leadership in Washington.

And one of the best arguments for reform is that the internal revenue code is an unfair mess.

Consider how rich people are treated by the tax code. The system is so complicated that we can’t tell whether they’re paying too much (because of high rates and pervasive double taxation) or paying too little (because of special preferences and tax shelters).

Regardless, we do know that they can afford lots of lobbyists, lawyers, and accountants. So even though they are far more likely to be audited, they have ample ability to defend themselves.

But the real lesson, as I explain in this CNBC interview, is that the right kind of tax reform would lead to a simple system that treats everyone fairly.

From a libertarian perspective, that’s obviously not very impressive, particularly since the public sector was consuming about two-thirds of economic output at the start of the period.

But by the standards of European politicians, 1.9 percent annual growth was relatively frugal.

And since Mitchell’s Golden Rule merely requires that government grow slower than the private sector, Sweden did make progress.

Real progress.

It turns out that a little bit of spending discipline can pay big dividends if it can be sustained for a few years.

This second chart shows that the overall burden of the public sector (left axis) fell dramatically, dropping from more than 67 percent of GDP to 52 percent of economic output.

By the way, the biggest amount of progress occurred between 1994 and 1998, when spending grew by just 0.27 percent per year. That’s almost as good as what Germany achieved over a four-year period last decade.

It’s also worth noting that Sweden hasn’t fallen off the wagon. Spending has been growing a bit faster in recent years, but not as fast as overall economic output. So the burden of spending is now down to about 48 percent of GDP.

And for those who mistakenly focus on the symptom of red ink rather than the underlying disease of too much spending, you’ll be happy to know that spending discipline in the 1990s turned a big budget deficit (right axis) into a budget surplus.

Now let’s get the other side of the story. While Sweden has moved in the right direction, it’s still far from a libertarian paradise. The government still consumes nearly half of the country’s economic output and tax rates on entrepreneurs and investors max out at more than 50 percent.

And like the United Kingdom, which is the source of many horror stories, there are some really creepy examples of failed government-run health care in Sweden.

A man who had his penis amputated because he was first misdiagnosed and then forced to wait five months for a follow-up examination.

Another man was forced to stitch up his own leg after a lengthy wait for medical treatment – and he then had to deal with insult added to injury when the bureaucrats reported him violating rules.

Second, if you’re still undecided about whether Sweden’s large-size welfare state is preferable to America’s medium-size welfare state, just keep in mind that Americans of Swedish descent earn 53 percent more than native Swedes.

In other words, Sweden might be a role model on the direction of change, but not on the level of government.

This is not a hypothetical issue. Here’s a passage from a local news report in Alabama about a state lawmaker who wants a special sales tax holiday for guns and ammo.

Rep. Becky Nordgren of Gadsden said today that she has filed legislation to create an annual state sales tax holiday for gun and ammunition purchases. The firearms tax holiday would occur every weekend prior to the Fourth of July. Alabama currently has tax holidays for back-to-school shopping and severe weather preparedness. Nordgren says the gun and ammunition tax holiday would be a fitting way to celebrate the anniversary of the nation’s birth and Alabama’s status as a gun friendly state.

I definitely admire the intent, but I’m enough of a tax policy wonk that the proposal makes me uncomfortable.

Simply stated, I don’t want the government to play favorites.

For instance, I want to replace the IRS in Washington with a simple and fair flat tax in part because I don’t want the government to discriminate based on the source of income, the use of income, or the level of income.